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SHOCKED

The wildcards that could shock the economy in 2022

Illustration of line chart that has a rip in it
Illustration by Anthony Eslic
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In Jan. 2020, Quartz surveyed the global economy’s prospects—from debt to trade wars to a slowdown in China—and ended with a section on “Wildcards,” hard-to-predict factors that might shock the world in the coming year. First on that list was a novel coronavirus currently spreading in Wuhan. That “wildcard” defined the year, so in 2021 we repeated the exercise; thankfully most of the shocks we listed didn’t come to pass but one of them, inflation, again helped define the year’s economic story.

We’ve covered the most likely risks elsewhere in this guide, from the implosion of Evergrande to continued failure to control covid-19. But four more worrying scenarios are also on our radar. It’s quite possible none of them will come to pass, but any one of them could shock the economy in 2022.

Hybrid work gets hacked

Cybersecurity briefly rose to the top of the public consciousness in the middle of 2021, after ransomware gangs hacked a major US fuel pipeline in May and broke into the networks of more than 1,000 businesses worldwide in a single hack in July. But despite these high-profile attacks, businesses have been slow to step up their cyber defenses (a costly and time-consuming process, especially for big companies with old IT networks). Many of the same vulnerabilities remain—and we can expect more of the same in 2022.

The world failed to meaningfully crack down on hacker havens, particularly Russia, in 2021. That leaves ransomware gangs with plenty of safe harbors from which to launch attacks against their host countries’ geopolitical rivals. Many of the hacker groups that authorities claim to have disbanded in 2021 may return in 2022 under new names.

Over the next year, cyber gangs will continue to have many targets to choose from, especially as companies embrace hybrid work; when employees can connect to a network from homes, co-working spaces, and coffee shops around the world, there are more potential points of failure where a company’s cyberdefenses can break down.

Hacker groups will also continue to step up their sophistication. In recent years, cybercriminals have built up a diversified economy around hacks: one group might specialize in scouting targets, while another focuses on developing the virus software used to infect companies’ networks, and another runs negotiations with the victims. More professional groups can carry out more elaborate attacks, including supply chain hacks against key software providers and “multifaceted extortion” campaigns in which hackers steal a company’s data, hold it for ransom, and also blackmail the firm with any damaging information they find.

Headline-grabbing hacks like the Colonial Pipeline attack are only the tip of the iceberg. Expect 2022 to be a year in which victims continue to quietly pay increasingly costly ransoms and skyrocketing cyber insurance premiums—Nicolás Rivero

The tech bubble bursts

In 2022, tech will continue to boom. Probably.

Last year, venture capital investment set records around the world and forecasters expect tech startups to raise even more in 2022. A lot of that money comes from so-called “alternative” VCs—hedge funds, private equity firms, and corporations that invest in tech startups. One sign the tech boom is ending would be alternative VCs pulling back on startup investing in favor of other sectors. If that happens it could leave startups unable to raise new funds and set off a correction across the tech sector.

When covid-19 hit, some analysts warned that alternative VCs would pull back; they didn’t and instead helped VC hit new highs. But in 2022, higher interest rates and the return of sectors that were decimated by the pandemic might shift some investors’ attention elsewhere. (The IPO market is another place to look for early signs that the VC boom is ending.)

If the macro environment becomes less favorable for tech startups, what else might be required to shake investors’ collective faith in tech? One candidate is a crypto meltdown, whether in the form of strict regulation, a major hack, or a scandal.

Tech investor Cathie Wood recently argued the real bubble was in index funds, not tech. She claimed technologies that were “not ready for prime time” in 2000 are now poised for growth. That may be true. But if investors come to believe web3 in 2022 is the equivalent of Webvan in 2000—a good idea too far ahead of its time to make any money—some of them might decide to back away from tech investing and look for something safer. —Walter Frick

Regulators crack down on crypto

The crypto markets could face a reckoning in 2022 as bitcoin topples from its $65,000+ mark and regulators threaten to clamp down on everything from stablecoins to crypto exchanges to high-yield crypto savings accounts.

After lambasting the crypto industry throughout 2021, describing it as a “Wild West” and calling for more regulation over the sector, SEC chief Gary Gensler could make good on his promise in 2022. At the moment, most sectors in the crypto industry aren’t officially under the purview of any financial regulator. Gensler argues that crypto tokens are securities, not commodities—which would mean it would fall under the SEC’s regulatory scope—and has advocated for greater SEC oversight of exchanges, lending platforms, and decentralized finance protocols. High-profile crypto companies like Coinbase, BlockFi, Celsius, and Uniswap already faced regulatory scrutiny for offering unregistered securities last year—with Coinbase shuttering its lending product after the SEC fired a warning shot.

Though crypto advocates have griped about the lack of clarity, more clear-cut policies in the coming year may prove to be more stifling for crypto businesses—or regulate them out of existence entirely. A crypto bear market—which last occurred in 2018—could mean the halving token prices, desperate “rug pulls” or exit scams, increasingly sketchy projects like B-list celebrity-backed NFTs and influencers hawking “social tokens.”

In 2021, China’s crypto crackdown failed to slow the sector’s global momentum. If the US—an equally large economy with an influential financial sector and the world’s largest market for venture capital—takes similarly stringent measures, crypto could fade out of the mainstream consciousness (again)—before it inevitably finds a way to rebrand itself. —Jasmine Teng

War breaks out

As 2022 begins, the US and Europe are looking anxiously at what’s happening on Ukraine’s eastern border with Russia, where tanks have been amassing in striking distance since December. A similar build-up in April ended with Russia largely withdrawing its troops, and analysts say the move is a signal of discontent with western policy toward Ukraine rather than intent. A strategic and psychic priority for Russia, Moscow wants a guarantee that Ukraine won’t join NATO, a demand that’s making Europe bristle.

The threat of a possible incursion by Moscow is already having economic ramifications. The Nord Stream 2 pipeline is nearly ready to come online and deliver gas from Russia to Germany, bypassing Ukraine. Germany needs the energy as it transitions to cleaner fuels—but now German ministers say they are ready to use the pipeline as a bargaining chip if Russia begins hostilities. (Outright fighting has long been a reality in Ukraine’s eastern Donbas area, despite a cease-fire with pro-Moscow militants.) But if the US moves first to impose sanctions to the pipeline, that could deepen its fissures with Europe.

Elsewhere, Ethiopia is in the middle of a civil war, now running for over a year. If the country falls apart economically, its six neighbors could find themselves dealing with a refugee crisis, jeopardizing the continent’s recovery. The India-China border remains tense after fighting killed soldiers on both sides in 2020. And rhetoric in mainland China about “reunifying” with Taiwan has become more prominent in recent months (though most analysts doubt this means Beijing actually wants to invade).

Nor do the risks from war end when they come to a supposed end. The departure of US troops from Afghanistan, and the start of Taliban rule, have led to fear and hunger in Afghanistan. If the Taliban either won’t or can’t prevent the country from once again harboring militants, it could be a destabilizing force, perhaps not in the coming year, but in years to come.

But the war most likely to weigh on the world’s economy has already been playing out for several years—the jockeying for economic and strategic advantage between the US and China that many are calling the new Cold War. —Tripti Lahiri